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The real consideration is utility. Maybe you don't have the nicest car but, it offers the same utility as a premium vehicle. Now, that money saved can be used t

The real consideration is utility. Maybe you don't have the nicest car but, it offers the same utility as a premium vehicle. Now, that money saved can be used to acquire more utility than a vehicle provides alone. This is what I consider frugality because the cheapest option can result in a loss of utility when it doesn't fulfill it's purpose. Saving money is great because it hopefully means you are purchasing the same utility without unnecessary overhead. Strangely enough, not enjoying a daily premium latte might be less frugal in the long run. You'd have to consider the utility of pleasure experienced over the years versus a few extra grand for your coffin.

moojacob 6y ago
> Strangely enough, not enjoying a daily premium latte might be less frugal in the long run. You'd have to consider the utility of pleasure experienced over the years versus a few extra grand for your coffin. It adds up faster than you would think: ditching your daily $3 latte saves $91.25 dollars a month. Investing that into a S&P index fund that traditionally has an average 7% annual return and 1.12% variance for over 50 years compounds into... $446,368.
- ajfjrbfbf 6y ago
  That's plenty for my gold plated coffin.
- raindropm 6y ago
  I like your quick math. It finally convinced me to ditch daily latte!
- AstralStorm 6y ago
  Assuming the index fund did not go to 2% in the meantime (or wiped alongside the bank getting you only weak guarantee), and that said latte is not keeping you sane and at work. Or from getting Parkinson's later on. So, where can I get that crystal ball that lets you know the impact of any action? That'd make a fortune and infinite boredom all a possibility.
  - moojacob 6y ago
    That's a completely valid point. Investing always brings risk. Including the risk that you could be hit by a car tomorrow.
    - AstralStorm 6y ago
      So does not investing. Or owning assets you do not directly use. The one good thing in the article is that it shows the power of saving more as a burst. It actually limits many types of risk, but then you can only actually do that if you have a rich job... (It does not address existential risks enough. There are a few important ones it should as they're related to investments and reasonable saving rates.) The advice to save on latte presumes you can actually afford it in the first place. Otherwise you're not saving, you're just not overspending. I liken it to the advice that you should buy stuff used to save money, when you need it. There are many caveats to that.
- _jahh 6y ago
  inflation
- wonnage 6y ago
  This is a silly simplification. You might have $446,368. You might have $0, because in the interim your kids had to go to college, or you buy a house, or you got sick and you live in developing country that can't help you pay for it. Or maybe none of this happens, and annual 3% inflation cut the real value by roughly 75%, and you had to pay 20% taxes on top of that. You're left with around 90k of value, of which ~36k is your investment return. In the meantime, you gave up 18,250 lattes.
  - moojacob 6y ago
    If we're going to be fair, we have to consider the 18,250 lattes too. Over time you'll build up tolerance and that cup of coffee isn't worth the same for you. Now you're burning cash for energy that would have been there without caffeine. And to think you could have paid for your kids college instead.
- Meandering 6y ago
  Obviously it pays to brew my own but, I was getting at the actual utility derived from the experience. Can you spend ~$1100 in one instance, at the end of every year, that produces the same total utility of pleasure you would have experienced from a daily latte? I'd probably drop the latte but, everyone is different. I would still argue that there are plenty of times when splurging is worth it in the long run.
  - klipt 6y ago
    Given the human tendency for homeostasis, I imagine people who have daily lattes are about as happy as people who don't. I never got into the habit of buying Starbucks coffee so lucky for me I guess?
    - tonyedgecombe 6y ago
      I don't know, a daily cup of tea in my local cafe is an opportunity for some social contact as I work from home all the time. If I didn't do that then I would probably end up spending more to work in a shared office space.
      - moojacob 6y ago
        You're right, that's a 100% worth it. But I think you missed a key point. Live frugally to have the financial independence to do things that genuinely make you happy.
        tonyedgecombe 6y ago
        I don't think I missed the point at all. I've been living it for the last 30 years.
- Sophistifunk 6y ago
  Is anybody actually buying a latte for $3? Or are they buying a socially acceptable trip away from the office for 15 minutes to clear their head, now that smoking isn't really a thing?
  - ghaff 6y ago
    >Is anybody actually buying a latte for $3? I don't disagree that sitting down and having a latte with someone (or even by yourself) is sometimes social/a break/a chance to work with some WiFi/etc. But for a lot of people it's just part of a morning ritual.
- hn_throwaway_99 6y ago
  I'd easily take the lattes, or really any small, simple pleasure that gives me a little bit of joy each day. Forgoing a latte a day over 50 years means I essentially have to make 18250 decisions in order to save this money. But, on the other hand, let's say I decide to forgo, say, a $60k car and instead get a still very nice $45k car. If I invest that $15k in your hypothetical S&P index fund, and deposit no new additional money, after 50 years I'll have... $441,855. So basically with just one, single decision I get the same benefit as someone that had to make 18250 decisions. The small shit really doesn't matter very much. If you simply focus your frugality on a few simple things (namely housing, auto, and education) you will always be light years ahead of someone who is constantly worrying about their lattes or avocado toasts or whatever small daily bringers-of-joy.
  - shakezula 6y ago
    I absolutely agree. Creature comforts are important parts of the human experience.
    - bumby 6y ago
      I think there’s also an important distinction between being able to legitimately enjoy creature comforts vs needing them to feel whole. “Appreciating” a luxury car shouldn’t be conflated with “needing” one
  - luckylion 6y ago
    > I essentially have to make 18250 decisions in order to save this money I don't think so. When I quit smoking, I had to consciously make the decision not to buy cigarettes every time I was at the checkout in a super market. That went away after about two weeks. For a few months that followed, I'd stand there thinking "and buy some cigarettes" and then I'd realize I didn't smoke anymore. I doubt that getting off of the latte-habit takes longer than getting off of cigarettes. Another question is whether small sugary treats are a good thing in general. Again the cigarettes as a comparison: cigarettes are the best when you haven't smoked for a day. But that's because you're suffering withdrawal, not because they're that great.
- watwut 6y ago
  Daily 3$ latte is most absurd example of saving strategy I seen and it gets repeated all the time. I don't even know people who would buy 3$ lattes daily. Most people get coffee in the office for free. Also, you cant invest your saved 90$ to investment fund. Those require higher initial capital.
  - dgacmu 6y ago
    You know none, and I know several (and used to have that habit myself - I walked past the Starbucks every day on the way to work and would drop in and grab a drink), but the truth lies in the data: Starbucks' gross revenue is more than 25 billion dollars a year. Their US revenue would be 12 cups per year spread across all of the 150 million coffee drinkers in the US, but you already know it's not distributed that way - ergo, there is a heavy tail of frequent Starbucks consumers who purchase daily or more.
  - deleted 6y ago
    [deleted]
- staticman2 6y ago
  A lot of experts expect significantly lower returns than 7% given modern valuations. So it's more like you have some chance at some unknown amount of compound interest. You're also assuming this person won't have to take the money out due to medical expenses or some other crises at a younger age. But even if you are correct, that person ditching the latte isn't going to be spending that 446,368 in old age either because it isn't "frugal". If they have a decent income they just end up dying with 446,378 in the bank.
- omgwtfbyobbq 6y ago
  Don't forget about inflation. That nominal 7% is I believe 4-5% in real returns.
jungletime 6y ago
About the car example... I switched to more expensive SUVs, and all these are anti frugality: 1.Car parts are often smaller (such as wheels) and less sturdy. And more prone to fail. 2. When an SUV is being built, the price premium allows the manufacture to build it using higher end components. 3. SUVs have more space to move and pack things 4. Better odds of surviving a crash vs a car. 5. Higher seated position means a better view of oncoming traffic. And so on ... I think frugality needs to be subservient to "form factor". Something that you are going to be using a lot, needs to be reliable, comfortable, and practical. A price premium is often justified in achieving these. I could probably go on. But the cheaper option is inferior.
- tonyedgecombe 6y ago
  >Better odds of surviving a crash vs a car. Top gear did a report on this years ago. They were four times as likely to roll in a crash as a saloon car. The stopping distance was quite a bit longer as well. There is also the issue of what happens when you run into a pedestrian.
  - summitsummit 6y ago
    > There is also the issue of what happens when you run into a pedestrian. I guess that's not relevant to parent's analysis from the perspective of maximizing his/her utility.
- imtringued 6y ago
  I have a cheap and small car with 110k km. It still feels like new. Maintenance is super cheap. I'm worried that I will never have an excuse to get an EV.

moojacob 6y ago

> Strangely enough, not enjoying a daily premium latte might be less frugal in the long run. You'd have to consider the utility of pleasure experienced over the years versus a few extra grand for your coffin. It adds up faster than you would think: ditching your daily $3 latte saves $91.25 dollars a month. Investing that into a S&P index fund that traditionally has an average 7% annual return and 1.12% variance for over 50 years compounds into... $446,368.

ajfjrbfbf 6y ago
That's plenty for my gold plated coffin.
raindropm 6y ago
I like your quick math. It finally convinced me to ditch daily latte!
AstralStorm 6y ago
Assuming the index fund did not go to 2% in the meantime (or wiped alongside the bank getting you only weak guarantee), and that said latte is not keeping you sane and at work. Or from getting Parkinson's later on. So, where can I get that crystal ball that lets you know the impact of any action? That'd make a fortune and infinite boredom all a possibility.
- moojacob 6y ago
  That's a completely valid point. Investing always brings risk. Including the risk that you could be hit by a car tomorrow.
  - AstralStorm 6y ago
    So does not investing. Or owning assets you do not directly use. The one good thing in the article is that it shows the power of saving more as a burst. It actually limits many types of risk, but then you can only actually do that if you have a rich job... (It does not address existential risks enough. There are a few important ones it should as they're related to investments and reasonable saving rates.) The advice to save on latte presumes you can actually afford it in the first place. Otherwise you're not saving, you're just not overspending. I liken it to the advice that you should buy stuff used to save money, when you need it. There are many caveats to that.
_jahh 6y ago
inflation
wonnage 6y ago
This is a silly simplification. You might have $446,368. You might have $0, because in the interim your kids had to go to college, or you buy a house, or you got sick and you live in developing country that can't help you pay for it. Or maybe none of this happens, and annual 3% inflation cut the real value by roughly 75%, and you had to pay 20% taxes on top of that. You're left with around 90k of value, of which ~36k is your investment return. In the meantime, you gave up 18,250 lattes.
- moojacob 6y ago
  If we're going to be fair, we have to consider the 18,250 lattes too. Over time you'll build up tolerance and that cup of coffee isn't worth the same for you. Now you're burning cash for energy that would have been there without caffeine. And to think you could have paid for your kids college instead.
Meandering 6y ago
Obviously it pays to brew my own but, I was getting at the actual utility derived from the experience. Can you spend ~$1100 in one instance, at the end of every year, that produces the same total utility of pleasure you would have experienced from a daily latte? I'd probably drop the latte but, everyone is different. I would still argue that there are plenty of times when splurging is worth it in the long run.
- klipt 6y ago
  Given the human tendency for homeostasis, I imagine people who have daily lattes are about as happy as people who don't. I never got into the habit of buying Starbucks coffee so lucky for me I guess?
  - tonyedgecombe 6y ago
    I don't know, a daily cup of tea in my local cafe is an opportunity for some social contact as I work from home all the time. If I didn't do that then I would probably end up spending more to work in a shared office space.
    - moojacob 6y ago
      You're right, that's a 100% worth it. But I think you missed a key point. Live frugally to have the financial independence to do things that genuinely make you happy.
      - tonyedgecombe 6y ago
        I don't think I missed the point at all. I've been living it for the last 30 years.
Sophistifunk 6y ago
Is anybody actually buying a latte for $3? Or are they buying a socially acceptable trip away from the office for 15 minutes to clear their head, now that smoking isn't really a thing?
- ghaff 6y ago
  >Is anybody actually buying a latte for $3? I don't disagree that sitting down and having a latte with someone (or even by yourself) is sometimes social/a break/a chance to work with some WiFi/etc. But for a lot of people it's just part of a morning ritual.
hn_throwaway_99 6y ago
I'd easily take the lattes, or really any small, simple pleasure that gives me a little bit of joy each day. Forgoing a latte a day over 50 years means I essentially have to make 18250 decisions in order to save this money. But, on the other hand, let's say I decide to forgo, say, a $60k car and instead get a still very nice $45k car. If I invest that $15k in your hypothetical S&P index fund, and deposit no new additional money, after 50 years I'll have... $441,855. So basically with just one, single decision I get the same benefit as someone that had to make 18250 decisions. The small shit really doesn't matter very much. If you simply focus your frugality on a few simple things (namely housing, auto, and education) you will always be light years ahead of someone who is constantly worrying about their lattes or avocado toasts or whatever small daily bringers-of-joy.
- shakezula 6y ago
  I absolutely agree. Creature comforts are important parts of the human experience.
  - bumby 6y ago
    I think there’s also an important distinction between being able to legitimately enjoy creature comforts vs needing them to feel whole. “Appreciating” a luxury car shouldn’t be conflated with “needing” one
- luckylion 6y ago
  > I essentially have to make 18250 decisions in order to save this money I don't think so. When I quit smoking, I had to consciously make the decision not to buy cigarettes every time I was at the checkout in a super market. That went away after about two weeks. For a few months that followed, I'd stand there thinking "and buy some cigarettes" and then I'd realize I didn't smoke anymore. I doubt that getting off of the latte-habit takes longer than getting off of cigarettes. Another question is whether small sugary treats are a good thing in general. Again the cigarettes as a comparison: cigarettes are the best when you haven't smoked for a day. But that's because you're suffering withdrawal, not because they're that great.
watwut 6y ago
Daily 3$ latte is most absurd example of saving strategy I seen and it gets repeated all the time. I don't even know people who would buy 3$ lattes daily. Most people get coffee in the office for free. Also, you cant invest your saved 90$ to investment fund. Those require higher initial capital.
- dgacmu 6y ago
  You know none, and I know several (and used to have that habit myself - I walked past the Starbucks every day on the way to work and would drop in and grab a drink), but the truth lies in the data: Starbucks' gross revenue is more than 25 billion dollars a year. Their US revenue would be 12 cups per year spread across all of the 150 million coffee drinkers in the US, but you already know it's not distributed that way - ergo, there is a heavy tail of frequent Starbucks consumers who purchase daily or more.
- deleted 6y ago
  [deleted]
staticman2 6y ago
A lot of experts expect significantly lower returns than 7% given modern valuations. So it's more like you have some chance at some unknown amount of compound interest. You're also assuming this person won't have to take the money out due to medical expenses or some other crises at a younger age. But even if you are correct, that person ditching the latte isn't going to be spending that 446,368 in old age either because it isn't "frugal". If they have a decent income they just end up dying with 446,378 in the bank.
omgwtfbyobbq 6y ago
Don't forget about inflation. That nominal 7% is I believe 4-5% in real returns.

jungletime 6y ago

About the car example... I switched to more expensive SUVs, and all these are anti frugality: 1.Car parts are often smaller (such as wheels) and less sturdy. And more prone to fail. 2. When an SUV is being built, the price premium allows the manufacture to build it using higher end components. 3. SUVs have more space to move and pack things 4. Better odds of surviving a crash vs a car. 5. Higher seated position means a better view of oncoming traffic. And so on ... I think frugality needs to be subservient to "form factor". Something that you are going to be using a lot, needs to be reliable, comfortable, and practical. A price premium is often justified in achieving these. I could probably go on. But the cheaper option is inferior.

tonyedgecombe 6y ago
>Better odds of surviving a crash vs a car. Top gear did a report on this years ago. They were four times as likely to roll in a crash as a saloon car. The stopping distance was quite a bit longer as well. There is also the issue of what happens when you run into a pedestrian.
- summitsummit 6y ago
  > There is also the issue of what happens when you run into a pedestrian. I guess that's not relevant to parent's analysis from the perspective of maximizing his/her utility.
imtringued 6y ago
I have a cheap and small car with 110k km. It still feels like new. Maintenance is super cheap. I'm worried that I will never have an excuse to get an EV.